Rock rescue lifts weight off banks' backs

Hopes that some of the big banks would raise their dividends in the upcoming reporting season, and relief over Northern Rock, lifted the FTSE 100 substantially, up 159 points to 5946.6.

The fact that US markets were closed for the Presidents' Day holiday also helped, as the index of 100 leading shares received no potentially negative cues from Wall Street.

Barclays was the top riser, up 32.5p at 460p, Lloyds TSB followed close behind with a 28.7p increase to 424.5p, and HBOS rose 30.5p to 639p.

These banks and others have underperformed amid growing financial turmoil. More than £25bn has been wiped off the value of Britain's big banks this month, but they were looking much better yesterday. Weekend reports suggested Barclays and Lloyds were likely to increase their dividends when they publish results today and on Friday respectively.

In fact, financial stocks generally had a good day yesterday, and none more than Prudential. Shares in the insurance group were up 29p at 622p.

This came after comments made by Bank of China, which said it wanted to buy into a life insurer this year, having already held talks with some domestic firms on taking a stake.

Analysts immediately speculated which insurer the bank might like to invest in, and Prudential emerged as a strong contender. The company has a strong and growing Asian division, with operations in 11 countries on the continent, including China.

The miners were also a cause of the significant market rise. Vedanta Resources, Rio Tinto and BHP Billiton were buoyed up by news that Vale, the Brazilian mining company, had negotiated a 65% increase in this year's iron ore prices with important Japanese and South Korean steel mills. Vedanta was up 108p at £21.80, Rio Tinto rose 233p to £57.26, and BHP increased 67p to £16.18.

Moneysupermarket.com topped the list of risers on the FTSE 250, up 14.2p at 126p.

The price-comparison website has seen its shares fall almost continuously since the beginning of November on concern that the credit crunch was affecting its loans business. Analysts at UBS yesterday upgraded it to buy from neutral before its full-year results next Tuesday. They said there was enough growth elsewhere in the group to offset any weakness in the loans division.

"There is no question in our minds that loans is suffering from a tighter market but it only represents 23% of 2007 revenue," they said. "We expect the other constituents of Money are still performing strongly, and growth in insurance, travel and home should largely offset any weakness, in our view."

ClinPhone, which develops technology for clinical trials, rose 11.2p, or 13.3%, to 97.5p after it rejected a takeover approach by Parexel, a similar US firm. The group said the offer "materially" undervalued the company and its prospects.

Dicom Group, the software company, took on 7p to 187p after it reported a 1% rise in first-half pre-tax profit to £6.1m on a 5% increase in sales to £82.4m. The group also announced a new company name. It will now be known as Kofax.

Plasmon, the archive company, saw its shares fall 1.5p, or 12%, to 11p after it deferred its cash break-even target to the second half of the year. The company said this was because it had decided to invest in a faster growth strategy.

Abbeycrest, a designer and manufacturer of jewellery, also suffered after its chief executive, Phil Walker, resigned abruptly "to pursue other business interests with immediate effect".

The executive chairman and the finance director are to divide Walker's responsibilities between them. Shares in the company fell 2p, or 10.3%, to 17.5p.

On Aim, Oxonica, the nanotechnology company, soared 27p, or 120%, to 49.5p after Stagecoach confirmed it would continue to use the firm's Envirox fuel combustion catalyst across its 7,000-strong bus fleet in Britain.

Stagecoach started testing Envirox in 2004. A validation trial in the second half of last year showed a fuel saving of 4.3% after three months, and the bus operator said it would continue to use it.

Boomerang Plus, an independent TV production company, rose 2p, or 1.1%, to 182p after it announced that its drama and extreme sports departments had won significant recommissions from Channel 4 and S4C, the Welsh-language television channel. These include the second series of two Welsh-language dramas, and the seventh series of Freesports on 4, which features snow boarding, surfing, skate boarding and mountain biking.

Canadian oil and gas company First Calgary Petroleums, took on 12p, or 10.4%, to 127p after it announced the appointment of JP Morgan Cazenove as its financial adviser and broker alongside Canaccord Adams.